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Maryland hospitals warn of jobs losses if federal cuts hit

By Andrea K. Walker, The Baltimore Sun

6:22 p.m. EDT, April 26, 2013

The Maryland Hospital Association said Friday that jobs may be in jeopardy if a state commission approves a plan that would make hospitals absorb all of the 2 percent Medicare cuts required under federal sequestration.

The board of the Health Services Cost Review Commission, which sets the state's hospital rates, is scheduled to vote Wednesday on how to implement the cuts. The commission's staff has recommended a plan that keeps hospital rates flat for the last three months of fiscal year 2013, which ends June 30.

Hospitals are pushing for a rate increase to help offset the cost of the cuts. Medicare accounts for 41 percent of hospital revenue on average, according to the American Hospital Association.

The state hospital association released a report Friday that said 1,450 Maryland jobs would be lost for every 1 percent drop in total hospital revenue. The job losses would come from hospitals and from firms related to the hospital industry. Hospitals in Maryland employ nearly 100,000 people, according to the report.

The commission staff declined to comment on the report. It had considered other options to deal with sequestration, including spreading the cost between insurers and hospitals and increasing hospital rates slightly.

In its recommendations, the commission staff worried how a rate increase would affect the state Medicare waiver, an agreement with the federal government unique to Maryland that allows the state to set hospital rates. Maryland keeps the waiver only if the average cost per admission rises no faster than in other states. The state is negotiating a new waiver test with the federal government, and commission members worried that a rate hike would harm those talks.

Sequestration cuts will be considered further in coming weeks as the commission hammers out hospital rates for fiscal year 2014, the commission staff wrote in its recommendations.

The hospital association has said the Medicare cuts come as hospitals already face financial pressure. The commission increased rates by 0.3 percent in fiscal year 2013, when inflation was expected to increase by 2.11 percent.

The commission staff said that hospitals are more profitable as a group this year than they were last year despite a reduced operating margin.